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Christine Tait

Last updated: 10/2019

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There are lots of different financial products out there today. Some of them are good and some aren’t. This article is designed to help you understand the pros and the cons of car title loans.

We’ll help you understand what a title loan is, the pros and cons of title loans, and then help you decide if a title loan is a good idea for you. Use this information to make informed decisions about your financial future.

Pros and Cons of Car Title Loans

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What is a Title Loan?

A title loan is a specific type of personal loan. The way it works is simple. You use the title to your car as collateral for your loan. As long as you make your loan payments, you get to keep driving your car. Once you’ve paid off your loan, then you’ll get the title back.

However, if you don’t keep up with your payments and default on the loan, then a title loan company can take your car to recover the cost of the loan.

As you can see, there are some potential upsides to title loans, but there are also some tremendous downsides as well. We’ll look at each of these in the next couple of sections before helping you decide if a title loan is right for you.

Pros of Title Loans

  • Fast, easy way to get money when you need it
  • Easy to qualify – most title lenders don’t run credit checks
  • Flexible loan amounts make it easier to pay your loan back
  • Roll-over financing can help you if you can’t make your payments
Pros and Cons of Car Title Loans

The first benefit of a title loan is that it’s a fast, easy way to get money. You don’t need much to get a title loan. All you need is to have a clean car title. That means in most cases you can’t get a title loan if you’re still making payments on your car.

This leads to the other benefit of title loans. They’re very easy to qualify for. Most title lenders don’t run a credit check or require extensive documentation. Instead, you just need the title to your car to get your loan.

Another benefit is that you can customize how much of a loan you take out against your car’s title. That means you can choose to not take the maximum loan amount offered to you. As a result, it’s easier to make your payments and get your title back with minimum fuss.

Finally, most title lenders offer roll-over financing. That means if you need a loan again when you’re still paying off your title loan, the lender will pay off your current loan as part of a new one. This can be a huge boon to people in a tough financial situation who need money now.

Cons of Title Loans

  • High Interest Rates
  • Potential Hidden Fees
  • Complex Contracts
  • Big Consequences to Default
Pros and Cons of Car Title Loans

That’s not to say that everything about title loans is awesome. In fact, title loans can be some of the most exploitative loans on the market today. Most title loans come with incredibly high interest rates. As a result, you’ll be paying a lot of money for the loan. Most people that get a title loan don’t have access to lots of extra money. That means the fees and interest on a title loan can put someone deeper in debt over the long-term even if they need money right now.

Another issue with title loans is the potential for hidden fees. This issue isn’t unique to title loans – lots of different financial products have hidden costs and fees associated with them. The difference here is that these fees can dramatically change how much you need to pay to get your title back. Moreover, some fees, like an origination fee, can take money directly out of the loan you’re counting on. That means you don’t even get the full value of the loan you’re paying for.

This leads to the third issue with title loans. The contracts for title lending agreements can be hard to understand. It isn’t always clear what conditions can cause you to lose your car. Sometimes contracts will have grace periods built in to help borrowers. However, other contracts let title lenders take your car the second your payment is late.

And that’s the biggest issue. If you default on a title loan, then you lose your car. That can be a huge setback. Most people need their car to get to work. Without your car, you may have problems making ends meet. As a result, the title loan can cost you much more money than you get out of it to begin with.

What’s worse is that if the title lender sells your car for less than you owe on your loan, then you’re still liable for the difference. That means you’re carless and still owe money on the loan.

Is a Title Loan Right for You?

Title loans can be a good idea in very limited situations. For example, if you need money for medical bills right now and know your paycheck is coming in a few days, then you might take a title loan to help you get by until you get your paycheck and pay off your title loan.

However, for most people there are better ways to get emergency funds than a title loan. The amount of money you pay for the loan and the risk that you lose your car from lack of payment makes it an extremely expensive and risky option for most lenders. After all, if you need a title loan, it’s very unlikely you’ll be able to pay your loan back unless you’ve got a surge of income on the way.

You should make a decision about title loans the same way you’d evaluate any other financial product. Evaluate the terms of the offer, understand how much you’ll be paying for the loan, and make sure you understand when your due dates and deadlines are. If you’re confident that you can repay the loan and you need the money right now, then a title loan might be a good idea. Otherwise, you should probably look elsewhere.

FAQ

General Title Loan Questions

This section will help you understand the basics of a title loan. Use this information to get a good foundation so you can make informed financial decisions.

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What is a car title loan?

A car title loan is a loan you get where you use the title of your car as collateral. When you pay the loan off, you get your title back. If you default on the loan, then the lender gets your car.

How do car title loans work?

A car title loan is pretty easy to understand. You use your car title as collateral for a loan. If you default on the loan, then the lender gets your car.

Are car title loans a good idea?

That depends on your specific situation. Many people use title loans for short-term funding shortfalls. However, the loss of your car if you can’t repay the loan can be devastating.

How much can I get for a title loan?

The amount you can get for a title loan depends on the lender’s policies and the type of car you have. You’re not going to get a loan that’s worth more than the car you’re using as collateral.

What do you need for a title loan?

The specific requirements for a title loan vary based on the jurisdiction you’re in, but generally you’ll at least need a clean car title to put up as collateral.

How to get a title loan without a job?

It can be difficult to get a title loan without a job. The best option you have is to explain to the lender why you’ll be able to pay the loan back without a job.

Can I get a title loan without the title?

No, you can’t get a title loan on a car that you don’t have the title to. You must legally own the car you’re attempting to get a loan on.

How to get a title loan without a clear title?

The ability to get a title loan without a clear title can change based on the state you live in. We recommend talking to a consumer advocate group in your area for more information.

How many title loans can you get?

Different states and localities have different regulations on how many title loans you can get.  Generally, you’ll only be able to have one title loan on a car at a time.

How do title pawn loans work?

Title pawn loans work by giving the title of the property to the lender to hold as collateral. If you pay your loan off, then you get the title back. Otherwise, the lender keeps the property.

Getting a Title Loan

We’ll answer the most common questions people have about getting a title loan in this section.

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How to get a title loan?

The best way to get a title loan is to look for a title lender in your local area. Contact them to find out what you’ll need to bring to get a loan.

Can I get a title loan on an old car?

You can get a title loan on an old car. However, the amount of your loan will be affected by how much the car is worth.

Can you get a title loan on a financed car?

In some cases, depending on where you live and how your car is financed, it is possible to get a title loan on a financed car. However, it usually won’t be possible.

Can you get a title loan on a broken car?

Some title loan companies will give you a loan for the title to a broken car. However, the amount of your loan is going to be very low since the car that’s acting as collateral is broken.

Can you get a title loan while still making payments?

It’s possible to get a title loan while you’re still making payments, but it’s very unlikely. You’ll need to talk to a loan agent in your area to find out more about your specific situation.

Can you get a loan on salvage title?

Most title loan companies will be willing to offer you a loan on a salvaged title, so long as the car itself still has value.

Can you get a title loan on a trailer?

Most title loan companies will be willing to give you a title loan on a trailer. However, this can change based on the company and the state where you live.

Can you get a title loan with a lien?

Not in most cases – a lien means that you don’t actually own the car you’re trying to use as collateral to get a loan.                                       

Can I get a 2nd title loan?

Not in most cases – you can’t usually have more than one title loan per vehicle. You could get a second title loan if you have another vehicle to use as collateral.

Do you need proof of income for a title loan?

Each company has their own requirements for what it takes to get a title loan. Some companies will ask for proof of income, while others might not.

Title Loans in Different States

This section answers the most common questions people have about title loans in different states.

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How do title loans work in Tennessee?

Title loans in Tennessee work in the same way as they do across much of the country. Your lender is obligated to explain TN law regarding title loans to you before you complete a transaction.

How do title loans work in Texas?

Texas title loans work in the standard way. You put your car title up as collateral for a short-erm loan and then repay the loan to get your title back.

Are title loans legal in Colorado?

Cash title loans are not legal in Colorado. That means the lender will need to retain possession of the car that you want to use as collateral.

Are title loans legal in Michigan?

Yes, title loans are legal in Michigan. There are laws and regulations that govern how a title loan can be structured.

How do title loans work in Nevada?

Nevada title loans follow the standard state laws for pawn lending. You can use your car title as collateral for a loan.

Sources of Title Loans

This section covers the different places that you can get a title loan.

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Where can I get a title loan near me?

Internet search tools are the best way to find a title lender near to your location.

Where can I get a title loan?

There are lots of places to get title loans. Most title lenders specialize in providing these kinds of loans, so search for a title loan place in your area.

Can I get a title loan online?

In many cases, yes. However, it depends on the laws for title and pawn lending where you live.

Can you get a loan on a branded title?

In most cases, yes. The loan amount will be based on the value of the vehicle title you’re using, so a branded title may not get you a large loan.

Can you get a loan on a rebuilt title?

Yes, you can get a loan on a rebuilt title so long as the lender will be able to legally sell the car to recoup their losses should you fail to repay the loan.

Does Wells Fargo do title loans?

Wells Fargo does not specifically offer title loans. However, they do offer personal loans and you may be able to use your car title as collateral to get approved for a personal loan.

Do credit unions do title loans?

Sometimes. Many credit unions stay away from title loans because the process of getting a selling a car where the borrower has defaulted is too much work to make sense.

What banks do car title loans?

Most banks don’t offer car title loans as a specific product. If a bank offers personal loans, then you might be able to use your car title as collateral to secure a personal loan.

Where is the best place to get a title loan?

Title loan places are different all over the country. The best place by you is going to be different than the best place for someone else. We recommend using an internet search tool to compare the rates and fees for different title loan companies to make the best decision.

Do pawn shops give title loans?

In many cases, yes. However, it is up to each pawn shop to decide if they will deal in title loans and what they’re willing to lend you for your title.

Does Chase bank do title loans?

No, Chase Bank does not offer title loans at this time.

Title Loan Terms and Repayment

We’ll answer the most common questions about title loan terms and repayments in this section.

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How long before title loan repossession?

Different states have different rules about how long a company must wait before they take ownership of collateral used to secure a loan when the loan is in default.

Can I get a title loan while still making payments?

Sometimes, but not usually. Each state and company have their own policies and laws regarding title loans on vehicles that are financed and not paid off.

Do you need insurance to get a title loan?

Not in most cases. You need insurance to legally drive your car, but you don’t need insurance to use that car as collateral for a loan.

How much are title loan payments?

The exact amount of title loan payments depends on several factors, specifically how much you borrowed, your interest rate, and the term of the loan.

What happens if you default on a title loan?

If you default on a title loan then the lender can take possession of your car.

What will happen if you don t pay title loan?

If you don’t pay a title loan then the lender is legally able to take your car and sell it to recoup the losses from the loan.

How long to pay off title loan?

Different states and companies have different rules about the terms for title loans. You’ll need to check with companies in your area to see what kind of term length they offer.

Title Loans, Credit, and Credit Reports

This section answers the most popular questions about title loans, credit scores, and credit reports.

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Do title loans go on your credit?

Not usually. Title lenders aren’t required by law to report your payments or lack of payments to the credit reporting agencies.

Do title loans build your credit?

Not in most cases. The only way a title loan will build your credit is if your lender reports to the credit monitoring agencies, which most title lenders don’t do.

Can a title loan be included in bankruptcy?

Possibly. It depends on your state’s laws. You’ll need to talk to your bankruptcy lawyer for more information about your specific case.

Can I get a title loan while in chapter 13?

Maybe. Bankruptcy and title loan laws change from state to state. You should talk to the lawyer that’s assisting you with Chapter 13 for more information on your situation.

Can you get a title loan with bad credit?

Yes, you can get a title loan with bad credit. Many title lenders don’t even check credit scores before they process your loan.

Other Title Loan Questions

We’ll cover title loan questions that don’t fit in our other categories in this section. Check here if you can’t find your question elsewhere.

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Can you scrap a car with a title loan?

Not legally. If your car has a title loan, then you aren’t able to intentionally destroy or devalue it.

Can a title loan company report your car stolen?

Yes, if you default on your title loan and the company attempts to take possession of your car, then it can be reported as stolen if you don’t turn it in to the lender.

Can I file bankruptcy on a title loan?

In many cases, yes. However, laws for bankruptcy and loans change depending on where you live. You should talk to your bankruptcy lawyer about your specific situation.

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Christine has a solid background in personal finance as she spent the last eight years working at one of the biggest banks in the US. She managed her own team of financial advisors that helped hundreds of people with their financing needs. Her innate understanding of different financial products and loans helped her move up the ranks quickly after graduating with a degree in Business Administration.